Rage Against the Machine
Departing from our premonitions of where the U.S. may be headed, we pause to wonder in what direction mankind is ‘progressing’…and why. This DR Classique was originally published on October 27, 2000.
"I think I will strangle myself."
Thus did Henry, 10, begin his letter.
One of six children, Henry realizes that a little dramatic flourish will get the reader’s attention.
It turned out that he was not really upset…but merely frustrated. He has been staying at an abbey deep in the French countryside with his school class. He mentioned something about a fire – but, like the key clue in a mystery novel, gave no further details. His only complaint, with himself, was that he kept losing pens and pencils – and perhaps underwear.
Henry seems to have a flair for writing. In an earlier stage of his academic career, parents were called in to the school to encourage the children to write. Each parent worked with two or three students. But Henry was so prolific; he needed one long-suffering parent all to himself.
And maybe I have already told you this, but I will do so again – the story of how Henry, at the age of 6, came to be considered a genius by his teachers.
You may be wondering, as you often must, what this has to do with investing. Well, I don’t know either. But since The Daily Reckoning is free, I feel entitled to some gratuitous bragging about my children from time to time. And perhaps, you’ll find something in this story or what follows that may be useful to you.
When kids begin school they are given a simple test to make sure they are ready. The children at 5 or 6 cannot yet read, so pictures of various things are held up…as the kids are asked to identify them.
Well, the background to the story is that we were living on our farm in Maryland, and Henry would help milk the cows and goats from time to time. Being an inquisitive chatterbox, he kept the dairyman busy by asking questions, inducing a flow of information about the dairy trade.
So, when the teacher held up the cards, Henry correctly identified the cat as a cat, and the dog as a dog…but when he got to the cow Henry chirped, "Oh…that’s an American short-horned milking breed."
Part of the program out at the abbey was an introduction to computers and the Internet. Every child in the civilized world is now supposed to learn how to use the Internet before he learns how to conjugate verbs or find the median line of a triangle.
The Pre-Internet Era: Poor Dylan Thomas
What’s more, teachers now expect their students – at least here in Paris – to have access to the Internet at home. Homework assignments often involve Internet research.
So important is Internet access thought to be that editorialists worry about the ‘Internet gap’ between rich countries and poor ones, and between black and white population groups in the United States.
At this point, dear reader, you may be expecting a curmudgeonly – almost sourpuss – comment from your editor. I won’t disappoint you:
Now that the Internet is considered an indispensable learning tool, I can’t help but wonder how the poor unfortunates in pre-Internet, pre-Bandwidth plenty era ever got along. Aristotle, Archimedes, Plato, Plutarch, Galileo, Michelangelo, Erasmus, Pascal, Newton, Jimmy Rogers, Jefferson…why do I even bother to list the names? Rockefeller, Carnegie, Morgan…in any era, in any pursuit…throughout all of mankind’s history – people have done remarkable things without ever getting an email message or typing out www.
Dylan Thomas, who was born on this day in 1914, wrote in ink on – would you believe it – paper:
"In my craft or sullen art
Exercised in the still night
When only the moon rages
And the lovers lie abed
With all their griefs in their arms,
I labour by singing light
Not for ambition or bread
Or the strut and trade of charms
On the ivory stages
But for the common wages Of their most secret heart"
"What we call progress," said Havelock Ellis, "is the exchange of one nuisance for another nuisance."
The Internet is certainly a handy communications tool…like the telephone or the television. But it doesn’t improve the quality of a writer’s poetry…and could even reduce the wage rate ‘of their most secret heart.’ Like TV and the telephone, the Internet is a great tool for people who want to waste their time or the time of others.
Hardly a day goes by that doesn’t demand hours of time spent handling various Internet-related chores. My e-mail in-box has hundreds of messages in it at any given moment. Which ones are important? Which ones are insipid? Which ones will interrupt my thought process or maybe even my sleep? I just don’t know. But I know it will take me a long time to find out. As I have pointed out many times, the world has not too little information, but too much – most of it useless rubbish.
No respectable desk from Helsinki to Singapore is without its computer screen. Take it off, and the desk is like a 4- star general without his clothes on…a figure of ridicule and contempt. And yet, how many hours of each working day are wasted, sorting through the useless information delivered in bulk via Internet?
Sophia, doing a research project for school, spent hours on the Internet trying to find out about some event in history. In less than a minute, better information was available from a discarded set of encyclopedias, now gathering dust on the shelves, like the forgotten horse collars in the barn.
The Pre-Internet Era: The Constant Bawling of the Electronic Media
You may want to disregard this letter as the ruminations of a romantic fuddy-duddy, but not every technological development is beneficial. Television, which lights up the houses of even the poorest families in America, is probably a net loss to everyone. Hours and hours are wasted in silent viewing – which could have been used to produce things…or at least to get in a good argument with your spouse. Who has not lost a good drink…or a good meal…or maybe even moment of honest reflection to the constant bawling of the electronic media?
Are people richer since the advent of the Information Revolution? Not really. Real incomes peaked in the 70s. People work more hours now, and more family members work per household, but real disposable income per hour worked is actually down. And most recently, as noted above, real incomes are actually rising at only half the rate of the GDP.
What’s more, the Internet is expensive – eating into net family income like a starving Ethiopian into a banana tart.
"Twenty years ago," observes Marc Faber, "[a family] spent its income on housing, clothing, food appliances, cars, a radio and a TV. Today, it will spend additional money on a DVD player, computers, fax machines, printers, several cellular phones and a whole host of other new electronic gadgets…modern society requires people to continuously enlarge the ‘basket of goods’ that are considered necessary to lead a ‘good life.’"
My question is simply this: is all this communications gear really improving the quality of life? Or is it impoverishing us…drowning us in trivial pursuits and time-wasters as television did?
If the Internet does not make us richer…perhaps it makes us happier. The most popular websites, I am told, are those that offer pictures of people without any clothes on…doing things that are usually done in private. Surely, this amusement must lift the spirits of the general population. After all, Bush’s comment that a NYTimes reporter resembled a ‘major league’ fundamental aperture lifted his poll standings.
But the only surveys I have seen on this subject suggest just the opposite. People report that they are less happy today than they were before Al Gore invented the Internet.
The only figure I have readily in hand is this (from the Internet, of course):
"A shrinking share of Americans is happily married. The percentage that said their marriages were "very happy" fell from 60% in the mid-1970s to 53% by the late 1990s."
What to make of this? What to make of the Internet…and all the other communications paraphernalia…?
It is not necessarily bad…but like every technological ‘improvement’ – it comes at great cost.
Your upbeat…plugged in…e-savvy correspondent…
The Daily Reckoning
August 26, 2005
P.S. Soon after Henry was declared a ‘genius,’ I decided to conduct my own test:
"Henry," I asked, "if you were in the bathtub with the water running…and the water was getting up to the rim…and you couldn’t turn the water off…what would you do?"
"Uh," said the genius pre-schooler, who didn’t think of pulling the plug, "go get you, Dad."
Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).
"If the ‘Bubble’ Bursts, Legacy of Greenspan May Deflate," reads a headline in today’s LA Times.
"Many experts say the nation’s real estate market draws disturbing similarities to stocks in the late 1990s – a market driven to unsustainable price levels by what Greenspan famously called ‘irrational exuberance,’ the article continues. "They fear a similar ending: a sharp fall in prices that could bite the net worth of many Americans and trigger a recession." (More on Greenspan, below…)
It’s as though the light bulbs are switching on above these "experts’" heads all over the country – on the opposite coast, we read this from the NY Times:
"For now, all the talk about bubbles may be just talk. In the late 1990’s stock market, those who warned that prices were too high were discredited by the final huge rise in 1999 and early 2000. Only after most bears were silenced did they become right."
Slowly but surely, people are starting to see things without the rose-colored glasses that are standard-issue with every credit card application and interest-only loan handed out in our bubble economy. The NY Times article frets over what will happen when housing prices fall and these "financial innovations" made by the mortgage-lending industry will not be there to cushion the blow.
"But [these] mortgages are designed to allow monthly payments to rise rapidly. Rising interest rates, or the end of five-year teaser periods, can cause such increases, which would leave some homeowners unable to meet the payments. They expect to refinance, but that is impossible if the house is not worth the amount owed. The result could be forced sales into a weak market."
The end is near, dear reader. We can feel it. We can almost smell it.
But, as promised, we’ll hold our "I told you so’s" until then.
Now for the news, from our team at The Rude Awakening:
Dan Ferris, reporting from Oregon…
"Our emotions are in check. We fear the frothy housing market, but we do not fear buying – and holding – undervalued real estate stocks."
Back in Baltimore…
*** The Greenspan Housing Rhetoric has risen from "frothy" in May, to a "particular concern" in July, and now, at a Fed symposium in Jackson Hole, Wyoming, the Fed chairman calls the housing boom an "imbalance" – the worst label yet.
In his speech to central bankers and economists, he said that high home prices are consistent with low risk premiums demanded by investors, which have kept interest rates low.
Such increases in asset values "are too often viewed by market participants as structural and permanent," he said, adding that lenders could quickly turn cautious and the "newly abundant liquidity" could "readily disappear."
"History has not dealt kindly with the aftermath of protracted periods of low risk premiums," Greenspan said.
According to Sherry Cooper, chief economist for BMO Nesbitt Burns, "Greenspan is saying, ‘Watch out! Think again and reduce risk in the management of your money, business, career, and balance sheets."
After these cautionary comments, the dollar fell…but what really affected the U.S. currency are continued concerns over high oil prices and the downturn in U.S. durable goods orders.
*** Another reader response to Kevin Kerr’s "Homeland Insecurity"…
"I just read your note about returning to the United States. I am worried about leaving this country for just the reasons you state – they might not let me back home for some reason. I met an attorney at a tire store recently who said that people do not realize how much civil liberties have been lost. Any time there is a large organization; there is miscommunication, creation of personal fiefdoms, and inefficiencies. So, even people who think they are doing the right thing sometimes appear incompetent. The last time I tried to fly, I was carrying my computer that I had been using in the waiting area. In a rush to not miss my flight, I just stuffed the AC connection cables and phone cord into the back pocket of the bag. The pocket was open and just had a small Velcro tab to hold it shut at one point at the top. The result was that the wires were poking out a bit.
"Well, I put the computer on the belt, then put the bag on the belt behind it. At the other end, the fellow in charge of checking bags held onto my bag. I went up to it to retrieve it and he told me to stand back. This puzzled me, but did as he asked. He then pulled at the phone cord, pulled the Velcro tab open, and started loudly saying ‘there’s wires here!!’ I tried to explain it was a phone cord and AC adapter, but he just told me to stand back. I became very nervous at that point. I guess that other people told him that it was OK, but before they gave me my computer bag, they had me go through a search and take off my shoes. The entire experience was unnerving because it appeared to me that the person in charge of searching bags evidently had no idea what he was looking for, and had no idea what normal electronic equipment looks like. In addition, if I were trying something, wouldn’t I have closed things up better? I had just stuffed the cords partly hanging out in my rush to get to the gate on time.
"In any event, I am very nervous about flying anywhere, and now do not trust the people who are supposed to be looking out for us."
And one more…
"TSA strongly recommends that you remove your shoes before passing through the detector. Apparently, they can’t order you to take your shoes off. If you refuse, then you usually are pulled aside for a manual check.
"I recently used my computer to print out a sign ‘Repeal the Patriot Act’ complete with an American flag on adhesive backed paper. I attached it to the cover of my laptop. Normally, the sign is hidden in my computer case – it is only under the direct orders of TSA that it is displayed in public. So far, no problems."